In the current business world, outsourcing has become a major player in bringing operational efficiency to businesses in a wide range of fields. It is quickly gaining a spot as the must-have feature for any business that needs to reduce costs while improving the quality of services for its customers.
What is Outsourcing?
Do you want to know what is outsourcing? The outsourcing definition, in simple words, is a practice that many businesses follow when they are looking to reduce the cost of their operations from any angle. Depending on the requirements of the business and its own outsourcing definition, this can be anything from logistics to HR, Accounting, and even IT infrastructure. Of course, when you ask what is outsourcing, these are only the generic types, and as per the broad outsourcing definition, you can find plenty of more to add to it these days.
What are the actual meanings of outsourcing and why is it needed?
Outsourcing is the process in which businesses take one or multiple aspects of their operations and ask another company to run it for them. Typically, these companies are highly specialized in running certain types of functions for businesses.
The purpose of choosing this practice and general outsourcing meaning is to reduce the overhead costs incurred by hiring people for those functions and to introduce a certain level of expertise that may cost you much more if you hire experienced team members.
Types of outsourcing – get to know them
There are countless types of practices meeting basic outsourcing meaning these days as people are finding new ways every day to operate in a highly lean and efficient structure. These include IT outsourcing, HR outsourcing, operational outsourcing, process outsourcing, project outsourcing, and many more. Each of them has its own specific scope and purpose and can be modified as per the organization’s needs.
What are the Benefits of Outsourcing?
There are quite a few benefits of using features like HR outsourcing and IT outsourcing. Many of them are also dependent specifically on the type of requirements. The most common benefits you can get include:
- Lower operational costs.
- Higher performance level
- Increased efficiency
- Access to specialized tools, services, and products
- Increased financial freedom to invest in other areas
What is the risk of outsourcing?
Outsourcing does not go risk-free and you can certainly see some problems occur from time to time. Some common issues faced by outsourcing include:
- Communication barriers
- Lack of specialized knowledge
- Reduced control over operations
- Slow turnaround
Pros and cons of outsourcing – summary
As we just saw, there are both pros and cons of outsourcing. While it can reduce business costs and provide much more effective results. It can also go the opposite direction and become a hindrance for business operations which can directly impact how well a business performs overall. The ultimate decision in this regard needs to be based on what you are getting from outsourcing a function and what you are going to lose from it.
Outsourcing vs. Offshoring – What the Choice Depends on?
In theory, the basic function in outsourcing vs. offshoring is the same. Both concepts are about sending jobs out of the company to be done by other people. However, the differentiating factor in outsourcing vs. offshoring is that offshoring sends the job out of the country. Of the many outsourcing examples, a great one is Apple getting their devices manufactured in China.
While both functions can be chosen for reducing operational business load and allow them to be lean, offshoring is only chosen for cost benefits. If a better solution is present in a different country that can fulfill your needs for a lower cost, you should opt for that. Some legal requirements and restrictions may also prevent companies from getting certain jobs done within their own country.
Which Is the Best Example of Outsourcing?
People often ask what is the best example of outsourcing, but the truth is that there is no fixed answer. Right now, one of the best outsourcing examples is Google, an organization where giving work tasks to remote workers has been a trend for years. This has become even more prevalent now with the pandemic causing people to stay at home for work. The work types that they outsource are also quite a lot. The most popular and frequent ones being IT work, assistant work, software development, and even some other functions.
Google has hired close to a thousand people from dozens of countries for different tasks over the years. In fact, their customer service division was also highly dominated by remote workers who took as many as 10,000 calls per week!
How to Outsource the Best Software House or Developers?
Finding good outsourcing developers for IT outsourcing services is no easy task. You need to know exactly what you are doing if you want to have any chance of benefitting from IT outsourcing services. Look for the following traits in the company/developers.
- They need to have sufficient experience in providing outsource software solutions and a market presence with a portfolio.
- Good references and client testimonials can provide you a candid overview of the performance of the company.
- The money they are asking for their services should also be within your budget range. You can learn more about it in our article.
- The timelines and schedules they are offering should also meet your requirements and standards.
- The technologies they are using are also a great factor in determining how up-to-date the company is and how quickly they adapt to new trends.
- Do make sure that you get a formal agreement against the services that you are hiring the company for.
Every factor described above plays a key role in the decision to hire any development firm or individual. You cannot ignore any of them if you want to hire the best options available out there. See also how our software house approaches outsourcing.